Is Transparency Good for You, and Can the IMF Help?
IMF Working Papers, June 1, 2003
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- Is Transparency Good for You, and Can the IMF Help?
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Bibliographic details
- Authors: Yongseok Shin, Rachel Glennerster
- Published: June 1, 2003
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451855401.001
Summary findings
- Reforms introduced by the IMF to promote transparency have created more informed markets and reduced borrowing costs for those emerging market countries that volunteered for them.
- Sovereign spreads fall following the adoption of three different transparency reforms.
- The effects are economically important, especially for those countries with low initial transparency.
- Spreads move more than normal in the days immediately following publication of IMF country documents (a “publication effect” / news effect).
Empirical approach and methods
- Quarterly panel estimation with fixed country effects is used to identify effects of transparency reforms on sovereign spreads.
- Two-stage least squares (2SLS) is used to address potential endogeneity in the timing of reforms, exploiting internal IMF timetables that are unrelated to country events.
- A panel GARCH specification is used to analyze higher-frequency dynamics and show that spreads move more than normal in the days immediately following publication of IMF country documents.
Policy implications and interpretation
- Transparency-enhancing reforms promoted by the IMF can reduce sovereign borrowing costs for participating emerging market countries, with larger gains for countries starting from low transparency.
- Timely publication of IMF country documents generates noticeable market reactions; the immediate market response to IMF publications suggests that publication timing and content can be an instrument for affecting market perceptions and spreads.
- Addressing endogeneity in reform timing is crucial for causal interpretation; internal IMF timetables provide instrumenting variation to strengthen causal claims.
Relevant subject areas and keywords
- Subjects: Credit ratings, Economic and financial statistics, Emerging and frontier financial markets, Financial markets, International capital markets, Money, Securities markets, Special Data Dissemination Standard (SDDS).
- Keywords: Africa, Article IV, Article IV publication, Article IV report, Asia and Pacific, borrowing costs, capital markets, Central and Eastern Europe, credit ratings, data dissemination, Emerging and frontier financial markets, emerging markets, GARCH, IMF, IMF country document, IMF document, IMF report, institutions, International capital markets, least squares, market information, Middle East, news effect, program country, publication, publication effect, role of the IMF, ROSC, SDDS, Securities markets, sovereign spreads, Special Data Dissemination Standard (SDDS), Transparency, Western Hemisphere, WP.
Working Paper: "Is Transparency Good for You, and Can the IMF Help?", Yongseok Shin and Rachel Glennerster, June 1, 2003; IMF Working Papers 2003, 132 (2003).
Content in this bundle
- Is Transparency Good For You, and Can the IMF Help? WP/03/132